Answer to Question #223348 in Microeconomics for Loh

Question

If c=R20 billion, I=R30 billion, g=R25 billion, x=R15 billion, z=R12 billion, c=0,75 the value of the multiplier is?

Answer 1

Solution:

The value of multiplier = 4

The multiplier formula = $\frac{1}{1 - MPC}$

MPC = 0.75

The value of multiplier = $\frac{1}{1 - 0.75} = \frac{1}{0.25} = 4$ 1/(1 – 0.75) = 1/0.25 = 4

The value of multiplier = 4